SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________

FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) of the

        SECURITIES EXCHANGE ACT OF 1934

        For the Quarterly period ended March 31, 2006

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

        For the transition period from ___________to____________

Commission File Number: 0-17843

REGAL ONE CORPORATION

(name of small business issuer as specified in its charter)                                

Florida                                                                                                                                                                                     95-4158065

(State or other jurisdiction of                                                                                                                                              (IRS Employer

Incorporation or Organization)                                                                                                                                            Identification No.)

Copies to:

(310) 312-6888

(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [  ]

Is the Company a shell company as defined in Rule 12b-2?   YES [  ] NO [X]

As of March 31, 2006, the Company had 4,633,067 shares of common stock issued and outstanding and 100,000 shares of convertible preferred stock issued and outstanding, with that total number of preferred shares convertible into 10,000,000 shares of the Company's common stock.

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

Item 1.  Financial Statements

Item 2.  Management’s Discussion and Analysis of Financial Condition and Operating Results

Item 3. Control and Procedures

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Securities Holders

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

PART 1 – FINANCIAL INFORMATION

George Brenner, CPA

A Professional Corporation

10680 W. PICO BOULEVARD, SUITE 260

LOS ANGELES, CALIFORNIA 90064

310/202-6445 – Fax 310/202-6494

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 Board of Directors

 Regal One Corporation

I have reviewed the accompanying balance sheet of Regal One Corporation as of March 31, 2006 and the related statements of operations and cash flows for the three-month periods ended March 31, 2006 and 2005.

These financial statements are the responsibility of the Company's management.  My responsibility is to express an opinion on these financial statements based on my reviews.

I conducted my reviews in accordance with standards of the Public Company Accounting Oversight Board (United States of America). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion.

Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States.

As discussed in Note 2, certain conditions raise substantial doubt that the Company may be able to continue as a going concern. The accompanying financial statements do not include any adjustments to the financial statements that might be necessary should the Company be unable to continue as a going concern.

As discussed in Note 1 “Basis of Presentation”, consolidated financial statements were included in the 2004 quarterly 10-QSB filings with the SEC.  However, because of pending litigation between the Company and its wholly owned subsidiary it was not possible to consolidate the parent company with its subsidiary as of March 31, 2006 and December 31, 2005 and for operations and cash flows for the quarter and year periods then ended.  

George Brenner, CPA

Los Angeles, California

May 19, 2006

Item 1.  Financial Statements

REGAL ONE CORPORATION

BALANCE SHEETS

MARCH 31, 2006 AND DECEMBER 31, 2005

See Accompanying Notes to the Financial Statements and Registered Accountant's Report.

            See Accompanying Notes to the Financial Statements and Registered Accountant's Report.

REGAL ONE CORPORATION
STATEMENT OF CHANGE IN NET ASSETS

(Unaudited)

  See Accompanying Notes to the Financial Statements and Registered Accountant's Report.

REGAL ONE CORPORATION

STATEMENTS OF OPERATIONS

For the Quarters Ended March 31, 2006 and 2005

 (Unaudited)

See Accompanying Notes to the Financial Statements and Registered Accountant's Report.

REGAL ONE CORPORATION

STATEMENTS OF CASH FLOWS

For the Quarters Ended March 31, 2006 and 2005

 (Unaudited)

See Accompanying Notes to the Financial Statements and Registered Accountant's Report.

REGAL ONE CORPORATION

STATEMENT OF FINANCIAL HIGHLIGHTS

 (Unaudited)

REGAL ONE CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

See Registered Accountant’s Report

NOTE 1 – NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Business

Regal One Corporation (the "Company") located in Los Angeles, California, is a Florida corporation initially incorporated in 1959 as Electro-Mechanical Services Inc., in the state of Florida.  Since inception we have been involved in a number of industries.  In 1998 we changed our name to Regal One Corporation. On March 7, 2005, our board of directors determined that it was in our shareholders best interest to change the focus of the company’s operation to that of providing financial services, and to be treated as a business development company (“BDC”) under the Investment Company Act of 1940.   On June 16, 2005 we filed a Form N54A (Notification of Election by Business Development Companies), with the Securities and Exchange Commission, which transforms the Company into a Business Development Company (BDC) in accordance with sections 55 through 65 of the Investment Company Act of 1940.  The Company is first reporting as an operating BDC in this 10Q-SB.

Basis of Presentation

On February 9, 2004, the Company acquired 100% of the stock of O2 Technology by issuing 1,000,000 shares valued at $0.6495 per share for a $649,526 investment.  During the course of 2004 the Company loaned O2 Technology $518,490 for an aggregate investment of $1,168,016.  Consolidated financial statements were included in the 10Q filings with the SEC for March 31, June 30, and September 30, 2004.  

As set forth in various previous financial reports and SEC filings, the Company is seeking a rescission of the O2 Technology acquisition. The Company’s CEO by action of its Board of Directors dismissed O2’s CEO and ordered all books and records turned back to the Company.  The CEO of O2 Technology refused the order.  As a result of the above circumstances, an audit of O2 Technology could not be performed.  The Company’s management has elected to fully reserve the $1,168,016 investment and seek redress through the courts.  Consequently, the accompanying financial statements are not consolidated.  However, pursuant to the pending results of the litigation, a possibility exists that the Company may need to amend these financial statements and file consolidated financial statements.  In such event, the consolidated financial position and results of operation may materially differ from those reflected in these unconsolidated financial statements.

The accompanying unaudited financial statements for the quarters ended March 31, 2006 and 2005 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions for Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for the quarter ended March 31, 2006 are not necessarily indicative of the results that will be realized for a full year. For further information, refer to the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005.

NOTE 2 – GOING CONCERN

For the fiscal year ended December 31, 2005, the independent auditor’s report included an explanatory paragraph calling attention to a going concern issue.  The accompanying financial statements have been prepared assuming that Regal One Corporation will continue as a going concern.  However, the Company's ability to generate sufficient cash flows to meet its obligations, either through future revenues and/or additional debt or equity financing, cannot be determined at this time.  In addition, the Company has suffered recurring losses and at March 31, 2006 has an accumulated deficit.  These uncertainties raise substantial doubt about the Company's ability to continue as a going concern.  Management did release and

close an equity offering in the first quarter, raising $145,000 from the sale of common stock.  Management plans to raise additional debt and/or equity capital and to initiate revenues over the balance of this fiscal year  The Company anticipates that through its investments in portfolio companies it will be able to achieve profitable operations.  However, there can be no assurance that this will be the case.  These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

NOTE 3 – EQUITY TRANSACTIONS

During the quarter ended March 31, 2006, the Company raised $145,000 through the sale of 362,500 shares of newly issued, unregistered common stock.  

During the quarter ended March 31, 2006, the Company made four option grants with the total grants amounting to 885,000 common shares of which 535,000 were vested in the quarter.  An expense of $136,555 was calculated under the Black-Scholes Option-Pricing Model and was recognized in the quarter for the vested options.  All the options are exercisable at the price of $0.50 per share, equal to or higher than the public share price on the dates of the grants, and option lives ranged from 3 years to 10 years.  No options were exercised during the quarter.

NOTE 4 – DEFFERED TAXES

The Company realized a net income in the quarter ended March 31, 2006 due to the unrealized appreciation on its investments.  The deferred taxes on this net income are offset by the tax benefit arising from a Net Operating Loss carryforward that the Company has for income tax purposes.  The Company’s deferred tax benefits totaled $1,306,000 at December 31, 2005 and were fully reserved at that time.

NOTE 5 – RELATED PARTY TRANSACTIONS

The amount due stockholders and officers of $213,258 represents advances which are non-interest bearing, un-secured and payable on demand.  Through March 31, 2006 there have been no demands made on Regal One to make any related payments.  An amount due of $94,357 to a former, deceased officer was reduced to $40,000 in 2002 and is now payable to the widowed spouse after all other payables are covered and at the discretion of the Board of Directors.

During 2005, Regal signed an option agreement to acquire a significant equity stake in SuperOxide Health Sciences, Inc. (SOHS), a privately owned development stage company.  Assuming full exercise of all rights by Regal One, it may acquire up to 40% of SuperOxide Health Sciences.  As of March 31, 2006, Regal One had made a total investment of $145,000 in SOHS as part of the agreement and in this quarter made a valuation adjustment to reduce the carrying cost of this investment to $72,500, and reflects the carrying cost net of the unrealized valuation adjustment in its balance sheet.  A principal of SOHS is also principal shareholder of Regal One.   

On March 13, 2006, the Company filed a form 8-K with the SEC announcing that Richard Hull, PhD, has been appointed by the Company’s Board of Directors to the positions of President and COO of Regal.  Dr. Hull holds a doctorate in biochemistry from Oxford University.  Dr. Hull is the son in law of the Company’s Chairman and CEO, Dr. Malcolm Currie.

See Registered Accountant's Report.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Operating Results

Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, among other things, statements concerning our expectations regarding:

·

the type and character of our future investments

·

future sources of revenue and/or income

·

increases in operating expenses

·

future trends with regard to net investment losses

·

how long cash on hand can sustain our operations

as well as other statements regarding our future operations, financial condition and prospects and business strategies.

These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements.  The following discussion should be read in conjunction with our Annual Report on Form 10-KSB, and the consolidated financial statements and notes thereto. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

We are a financial services company that invests in, coaches and assists biomedical companies in listing their securities on over the counter or national exchanges.  We were initially incorporated in 1959 as Electro-Mechanical Services Inc., in the state of Florida.  Since inception we have been involved in a number of industries.  In 1998 we changed our name to Regal One Corporation. On March 7, 2005, our board of directors determined that it was in our shareholders best interest to change the focus of the company’s operation to that of providing financial services, and to be treated as a business development company (“BDC”) under the Investment Company Act of 1940.   On June 16, 2005 we filed a Form N54A (Notification of Election by Business Development Companies), with the Securities and Exchange Commission, which transforms the Company into a Business Development Company (BDC) in accordance with sections 55 through 65 of the Investment Company Act of 1940.  The Company is first reporting as an operating BDC in this 10Q-SB.

Investment Strategy

The Company intends to make strategic investments in private biomedical companies with distinctive IP and well-defined, near-term applications that address significant and quantifiable markets. The Investment Committee has adopted a charter wherein these criteria will be weighed against other criteria including strategic fit, management ability, and the incremental value that the Company can bring to the potential client.  The potential client must also be willing to comply with the Company’s requirement as a BDC to offer significant managerial oversight and guidance, including the right of the Company to a seat on the then client’s board of directors.

As a BDC, the Company is required to have at least 70% of its assets in “eligible portfolio companies” which are loosely defined as any domestic company which is not publicly traded at the time of investment or that has assets less than $4 million. The Company has stated in its Investment Committee Charter that the Company will endeavor to maintain this minimum asset ratio.

Portfolio Investments

During the three months ending March 31, 2006, we did not add any companies to our portfolio. Our portfolio is comprised of three companies;

§

Neuralstem, Inc., a private company focusing on human neural stem cell research and development.

§

American Stem Cell, a private development stage company focusing on consolidating IP related to stem cell research.

§

SuperOxide Health Sciences, Inc., a private development stage company focused on the medical applications of airborne superoxide ions.

Investment Income

We anticipate generating revenue in the form of capital gains or losses on equity securities that we acquire in portfolio companies and subsequently sell. Potentially, we also anticipate receiving dividend income on any common or preferred stock that we own should a dividend be declared. We did not have any Investment Income for the quarter ended March 31, 2006 or 2005.  

Operating Expenses

For the quarter ended March 31, 2006, operating expenses were $247,526 compared to $57,793 for the quarter ended March 31, 2005. The 2006 amount consisted of professional services and consulting fees, non-cash stock option expense and general overhead.  The increase of $189,733 in the three month period ending March 31, 2006 as compared to the comparable period of 2005 is primarily attributable to increases in professional fees, non-cash stock option expense and higher general and administrative expenses including insurance, stemming from increased activity in managing our portfolio companies.  We anticipate operational expenses to continue to increase as we add more companies to our portfolio.

Net Investment Income/Loss

For the first quarter of 2006, net investment income was $(248,326) compared to $(58,593) for the same quarter of 2005.  The 2006 amount consisted primarily of professional services and consulting fees, non-cash stock option expense and general overhead.  The increase of $189,733 in the three month period ending March 31, 2006 as compared to the comparable period of 2005 is primarily attributable to the increases in professional fees, non-cash stock option expense and higher general and administrative expenses associated with increased activity in our portfolio companies and our inability to have yet recognized investment income.  We anticipate our net income loss to continue to increase as we add more companies to our portfolio and hold the securities of our portfolio companies for long term capital growth.

Liquidity and Capital Resources

The company has generated operating losses in the three-month period ending March 31, 2006 and in prior years and has generated an accumulated deficit of $8,219,967 as of March 31, 2006.  During the three month period ended March 31, 2006, we satisfied our working capital needs from: (i) cash on hand at the beginning of the period; (ii) gross proceeds from the sale of our common shares totaling $145,000; and (iii) an increase in current liabilities of $81,122.  We believe the cash on hand will last through September of 2006.  The Company will require additional capital to meet its operating needs.  There is no assurance that the Company will be able to raise any additional funds through the issuance of its preferred or common shares or that any funds made available will be adequate for the Company to continue as a going concern.  Further, if the Company is unable to secure adequate funding under acceptable terms, there is substantial doubt that the company can continue as a going concern.

Item 3. Control and Procedures

We maintain controls and procedures designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported on a timely basis and accumulated and made known to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on an evaluation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report conducted by our management, with the participation of

the Chief Executive and Chief Financial Officers, the Chief Executive and Chief Financial Officers believe that these controls and procedures were effective as of March 31, 2006.

In evaluating changes in internal control over financial reporting during the quarter ended March 31, 2006, management identified no changes in its internal control over financial reporting that occurred during the quarter ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On November 4, 2003 the Company and certain of its officers and consultants were named as defendants in a lawsuit by Eco Air Technologies and Svenska Gellenvent AB alleging ownership of certain technologies which the Company believed to be owned by its wholly owned subsidiary, O2 Technology, Inc. (“O2”).  On August 20, 2004, the Company answered the complaint and filed a cross-complaint against certain shareholders of O2 for rescission of the O2 acquisition agreement, return of the Company’s common shares and compensatory and punitive damages.  In October 2005, the Company executed a settlement agreement with Eco Air Technologies whereby the Company relinquished any claims it may have to the technologies in question and obtained certain marketing rights in several foreign countries and in domestic market niches.  The cross-complaint filed by the Company against O2 shareholders and their attorney and the subsequent cross complaint against the Company by O2 shareholders are unaffected by this settlement and are still being pursued by the parties.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following sets forth information regarding securities issued by the registrant for the three-month period ending March 31, 2006.

On August 23, 2005, we entered into a financial public relations consulting agreement with Equity Communications, LLC. As part of the agreement, we agreed to issue Equity Communications an option to purchase 160,000 shares of our common stock at $0.50 per share with piggy-back registration rights. The options began vesting on November 1, 2005 as follows; 60,000 shares vested immediately and 100,000 shares will vest on August 1, 2006 in the event that the consulting agreement is not previously terminated. The term of the option will be for a five year period commencing on November 1, 2005 and terminating on November 1, 2010.  We valued the grant at $27,236 for pro-forma financial statement purposes using the Black-Scholes option-pricing model and recorded this amount as an expense in this quarter. Due to an unintended oversight, the options were not issued until now.

On January 18, 2006, we issued to Mr. W.J. Reininger, in connection with his employment, a stock option to purchase 50,000 common shares at $0.50 per share, vesting immediately, with piggy-back registration rights, and exercisable for a period of three (3) years. We valued the grant at $10,529 for pro-forma financial statement purposes using the Black-Scholes option-pricing model and recorded this amount as an expense in this quarter.

On February 7, 2006, we issued to Mr. Richard Abruscato, in connection with his employment, a stock option to purchase 175,000 common shares at $0.50 per share during the period ending on February 7, 2013, with piggy-back registration rights. The option vest as follows: 125,000 shares were vested on the effective date of the grant and the balance of 50,000 shares vest on December 31, 2006 provided Mr. Abruscato is still providing services to Regal on that date. We valued the grant at $43,886 for pro-forma financial statement purposes using the Black-Scholes option-pricing model and recorded $31,347 of this amount as an expense in this quarter.

On March 7, 2006, we issued to Mr. Richard Hull, in connection with his employment as our President and Chief Operating Officer, a non-qualified stock option to purchase 500,000 common shares at $0.50 per share.  The option vests as follows: (i) 200,000 vested immediately; (ii) 50,000 shares upon Regal raising over $500,000 in new capital; (iii) 50,000 shares upon successful completion of the Neuralstem SB-2 registration; (v) 50,000 shares upon successful completion of the SB-2 registration of the third Regal client; (vi) 50,000 shares shall vest on March 7, 2007 provided Mr. Hull is still employed by Regal; and (vii) 50,000 shares shall vest on March 7, 2008 provided he is still employed by Regal.  The option has a term of ten years and expires on March 10, 2016, and has piggy-back registration rights. We valued the grant at $168,608 for pro-forma financial statement purposes using the Black-Scholes option-pricing model and recorded $67,443 of this amount as an expense in this quarter.

On March 31, 2006, we completed a private placement of our securities to four accredited investors. In connection with the offering, we sold a total of 362,500 unregistered common shares resulting in gross proceeds to the company of $145,000.  As part of the offering we granted the investors piggy-back registration rights as well as certain rights providing for the issuance of additional shares in the event the Company’s next round of financing is completed at a price of less than $0.60 per share. The Company intends to use the proceeds for general working capital.

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8-K

(a)

Index to Exhibits

(b)

Reports filed on Form 8-K during the three (3) months ending on March 31, 2006

On February 17, 2006, the Company filed a Current Report on Form 8-K announcing the appointment of Mr. Carl D. Perry and Dr. Neil D. Williams to the Board of Directors.  

On March 10, 2006, the Company filed a Current Report on Form 8-K announcing the Company reported Richard Hull as the Company's new President and Chief Operating Officer.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

REGAL ONE CORPORATION

/s/ Malcolm R. Currie

Malcolm R Currie, Chairman and Chief Executive Officer

Dated: May 19, 2006

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Certification required by Rule 13a-14(b) or

Rule 15d-14(b) and Section 906 of

the Sarbanes-Oxley Act of 2002

Exhibit 32.2

Certification required by Rule 13a-14(b) or

Rule 15d-14(b) and Section 906 of

the Sarbanes-Oxley Act of 2002